Following April's noteworthy progress, new home sales and traffic maintained improved levels in May. But builders' caution of what's to come in the near term, according to the John Burns Real Estate Consulting May survey released today. “We think the season’s modest uptick is fueled by Spring euphoria,” says John Burns, CEO of Irvine, Calif.-based John Burns Real Estate Consulting. “It’s been supplemented by improved affordability, low mortgage rates on conforming loans and federal and state new home tax credits.” Although, further improvements are likely to hit roadblocks, the report says, as new home sales are continually forced to compete with foreclosures, buyers and builders face limited credit and unemployment continues uphill. The Home Valuation Code of Conduct (HVCC) which took effect May 1, drastically changing the appraisal process, will likely be another leg down for new home sales in the near term, according to builders. "Appraisers are now more likely to compare new homes to foreclosures, which can be 'apples and oranges' in many cases," Burns says. A significant 53% of the survey's respondents indicate HVCC will have a significantly negative or somewhat negative impact on their selling process. Still, however, average sales per community have risen in May, driven by sales in entry level price points, with no region of the country reporting a decline. And 73% of survey participants have started homes, compared to 70% in April. The percentage of homebuilders rating current sales as Poor continues to decline, now at 53% compared to 56% last month and 87% in January. The ongoing issue of superfluous inventory shows improvement as well. The average number of unsold, finished units per community continues to trend down nationally, to 3.8 units from 4.0 last month. This is the lowest inventory level since the survey began in June 2008. Several builders even reported inventory getting tight in their respective markets. Write to Kelly Curran.